The Case for a U.S.-India Partnership

October 20, 2018 Topic: Security Region: Asia Tags: IndiaAlliesNarendra ModiTradeWar

The Case for a U.S.-India Partnership

A stronger India offers the prospect of a more stable balance of power in the Indo-Pacific, the world’s most economically dynamic region which stretches from the eastern shores of Africa to the west coast of the Americas.

Critics will argue that India is not ready for the responsibilities of membership in these bodies, that its economy is not yet advanced, that it can be difficult on trade issues and that it cannot be relied upon to automatically support the United States. These arguments not only ignore India’s inexorable rise, they also fail to recognize the likely impact on Indian policies that would accompany its assumption of part of the burden of global leadership. Leaving India on the outside looking in—rising as a global power, but unable to set the direction of the key instruments of global governance—erodes the viability of major international institutions. While India won’t always endorse American positions, we are likely to be surprised by how often we find ourselves in agreement on the most important global challenges.

FOR INDIA to emerge as a leading global power, it will need strong and sustained economic performance. India’s economic liberalization began in 1991 and has been propelled most recently by key decisions taken by Prime Minster Modi’s government. According to one estimate by Homi Kharas of the Brookings Institution, India will add more people—approximately 380 million—to its middle class between 2015 and 2022 than the entire population of the United States. Economic growth is critical to absorb the one million Indians who are joining the labor market each month, a staggering figure.

India is capable of achieving higher growth rates with deeper reforms that include easing restrictions on foreign investment and ownership, removing trade barriers and improving the protection of intellectual property rights. The United States stands to benefit from an economically prosperous India in two ways. First and foremost, a strong Indian economy aligns with the American strategic interest in India’s rise. Second, Indian economic dynamism benefits the American economy by offering scope for greater collaboration, investment and innovation. A vivid example of the value of trade can be seen in Boeing’s expectation that Indian airlines will need to purchase 2,000 aircraft over the next twenty years; it has already received orders for more than 300.

Unfortunately, recent decisions by the Trump administration are casting a shadow over trade ties. These include tariffs on steel and aluminum products and the Treasury Department’s addition of India to a list of countries to be monitored for currency manipulation. India has taken its own unwelcome actions, including increasing customs duties on a number of imports, and maintains a range of barriers that hinder trade and investment.

Ironically, when it comes to increased tariffs, both India and the United States appear to be partly motivated by at least one common factor—massive trade deficits with China. Thus, the Trump administration should be able to arrive at an understanding with India. It should begin by exempting India from steel and aluminum tariffs, just as it should for all close American partners. It should then prioritize a bilateral agreement that would govern trade and investment.

Both countries should seek creative ways to turn areas of friction into net positives. Poultry, financial services and insurance are just some examples of areas where U.S.-India economic integration holds great promise as disagreements are resolved. Reinvigorating the U.S.-India ceo Forum could generate creative ideas to overcome hurdles and identify opportunities that are responsive to both nations’ priorities. The Trump administration can also take an important step by prioritizing trade missions to India led by high-ranking officials. For example, the $100 billion Delhi Mumbai Industrial Corridor project, where Japan has partnered with India, offers a number of opportunities given the plans for large-scale infrastructure investments in smart cities, airports, power plants and rapid transit.

Trade presents one of the most difficult challenges in the bilateral relationship because of its political dimension. Yet, trade is not a zero-sum game as it benefits both countries. The overriding mutual interest in a broader strategic partnership must drive the trade relationship; trade disputes must not be allowed to derail that objective. However, the Trump administration’s reckless moves toward protectionism, coupled with the legacy of India’s restrictions on trade, could make for a perfect storm.

India’s policies have their origin in the legacy of colonialism, which distorted and weakened an economy that was once among the largest in the world. Today, a self-confident India with a talented workforce is more than able to hold its own and compete globally; it has much more to gain by phasing out antiquated measures from a bygone era. Similarly, the United States will suffer a serious self-inflicted economic wound that will harm consumers and American competitiveness if the Trump administration continues down the protectionist path.

IF TRADE implicates the most nettlesome issues in the U.S.-India relationship, defense and security cooperation represent the most promising aspects of it. In 2016, the Obama administration took the significant step of recognizing India as a Major Defense Partner. The Trump administration’s National Security Strategy builds on this by pledging to “expand our defense and security cooperation with India” as a key element of its strategy in the Indo-Pacific.

The United States and India conduct over fifty annual military exercises and have agreed to hold their first joint tri-service exercise later this year. The two countries have increased co-production and co-development of defense equipment thanks to pioneering work by former Secretary of Defense Ash Carter. American companies are even offering to produce advanced fighter aircraft in India itself, and U.S. defense sales to India have surged from less than $1 billion in 2008 to more than $15 billion today. India’s increasing use of highly-capable American systems enables inter-operability between the U.S. and Indian militaries, which provides the option for potential joint operations.

Yet, for all the progress, not all the news is good. India’s plans to acquire the S-400 air defense system from Russia could trigger sanctions under the Countering America’s Adversaries Through Sanctions Act, potentially setting back relations. Even if the Trump administration waives sanctions, India should still refrain from purchasing the S-400 to ensure that Russia is held accountable for its subversion of democracy around the world. At the same time, India’s defense needs must be met, so the United States should commit to being India’s partner of choice—which would accelerate New Delhi’s movement away from reliance on Russian defense equipment.

Unfortunately, difficulties persist in the approval of high-end U.S. defense exports to India. Decisionmaking on these matters is too often handled on a case-by-case basis, which undercuts American reliability as a defense partner. To provide coherence and predictability, the United States should agree to provide India with defense capabilities in three domains provided that adequate agreements and safeguards are in place to protect sensitive U.S. technology.

First, India should be able to make a significant contribution to preserving maritime security and the freedom of navigation in the Indo-Pacific. Second, if India is to be a global leader, it will require the means to project power effectively. Third, India should have the capacity to deter Chinese adventurism on land, at sea and in the air.

It is impossible to ignore China’s rapid military modernization, its building of military outposts in the South China Sea in flagrant violation of international norms, its increasing projection of power into the Indian Ocean and its incursions along the disputed Sino-Indian border. For example, last year China sought to construct a road in a disputed area of the Doklam Plateau that would have threatened the Siliguri Corridor—the narrow stretch of land that connects India’s northeastern states to the rest of the country. Growing Chinese assertiveness promises more such incidents involving India, other U.S. partners and even the United States itself. In this context, stronger Indian military capabilities would lead to greater stability in the Indo-Pacific.

As India’s military capacity grows, improving its ties with South Asian neighbors will become more important. The United States should offer to help India and Pakistan improve their relationship, as it will free up India to play a larger global role.

AS TWO democracies, the relationship between the United States and India cannot and should not be dominated by the interactions between governments. It is the bonds among our people that can endure and withstand the vicissitudes that may accompany changes in government or the whims of individual leaders.

Here, much work remains to be done by both countries. For instance, the discrepancy between the number of Indians studying in the United States relative to the number of Americans studying in India—186,000 versus a paltry 4,200—stands out. Indeed, the most recent data indicates that the number of Americans studying in India is actually declining. Alyssa Ayres with the Council on Foreign Relations notes that more Americans study abroad in Costa Rica, a country of 4.85 million people, than India, a country of 1.32 billion.

To address this problem, the Center for American Progress has offered a constructive proposal to establish a U.S.-India Strong Foundation, a public-private partnership which would aim to boost the number of Americans studying in India. One idea such a foundation could consider would be to partner with U.S. business schools as well as American and Indian firms to offer recent American business school graduates the ability to spend six months to a year working in India.